The Rise and Fall (and Rebirth) of CSD

How could one of Baltimore’s oldest and largest architecture firms suddenly collapse?

Ed Hord remembers Sunday, Sept. 6, 2009, as a particularly sunny day in Baltimore. The senior principal of design firm Hord Coplan Macht (HCM) was at home when he received a phone call from Tom Spies, then the senior vice president of CSD Architects. Hord and Spies were practically neighbors—in business and in life—with offices blocks from one another and homes in the same bucolic neighborhood north of the city. HCM and CSD were not exactly competitors, but they did share a healthy rivalry; over the years, Hord and Spies had developed a kinship in the small pond that is Baltimore architecture. When Spies said he needed to talk, Hord told him to come right over.

They sat outside under a Japanese Snowbell tree as Spies unloaded his news. CSD, he explained, was in deep trouble. Hord, like most of his peers, had had no idea just how bad things were at the 62-year-old firm, one of the largest in the region. He’d had an inkling that business was down. There were significant rounds of layoffs over the previous months—all cataloged in the Baltimore Business Journal—but who hadn’t had to jettison staff to survive the downturn? HCM itself had needed to lay off good people. Then there were the rumors about revenues. “We had heard that their ratios died, but we had heard that about a lot of firms,” Hord recalls.

The rumors turned out to be true. CSD’s cash flow had atrophied, leaving a seriously unbalanced ledger sheet. Revenue projections for 2009 were anemic—just $7 million, down from $15 million the year before—while fixed overhead remained high. The company was, to quote CSD president David Dillard, about to “hear the sound of metal on metal.” That could mean only one of three things: bankruptcy, a merger or acquisition, or something else altogether.

It was this third option that Spies wanted to discuss with Hord.

CSD Timeline

1947
Alex Cochran moves to Baltimore and opens Alexander Cochran & Associates. The same year, he designs a home for developer James Rouse, the first of many collaborations.

1975
Broadmeade, the first continued-care retirement community in the mid-Atlantic, opens.

1979
The Baltimore Convention Center, designed with NBBJ, opens.

1985
The second generation of leadership begins to take over from the founders.

Late 1990s
The firm moves away from general practice and organizes itself into three design studios: education, healthcare, and senior living.

2002
The Dallas branch opens.

2006
CSD is the biggest firm in Baltimore. A branch office opens in Miami.

2008
The Miami branch closes. CSD/k opens in Denver, focusing on interior design. It closes in 2009. The first of four rounds of layoffs begins.

Oct. 2, 2009
The firm closes. The education studio moves to Hord Coplan Macht and is open for business on Oct. 5.

In 1947, a young architect named Alex Cochran returned home to Baltimore. Born to a wealthy local family, Cochran had trained under Walter Gropius at Harvard, becoming a devout disciple of Bauhaus philosophy. Cochran was at first ambivalent about establishing a practice in his hometown, a place steeped in Georgian Revival, but he was convinced—in part by his former teacher Richard Neutra—that it was his duty to bring modern design principles to Baltimore. “Alex was to come here and spread the gospel of modern architecture. And he did,” Spies says.

Cochran scandalized the blue-blood set when he brought flat roofs and expanses of glass to local residential design—including to his own home on Lake Avenue, completed in 1949. Cochran’s biographer, Christopher Weeks, writes that the architect’s mother refused to enter the house, dispatching messages to her son and his young wife from the driveway (where she was “safely insulated from the creeping Bauhausism”).

The “S” and “D” in the firm’s name—James Stephenson and Richard Donkervoet—soon joined Cochran, and together they built a practice known for pushing design boundaries while championing the humanistic ideals of the modernist movement. Cochran, who believed that design could be a tool of social change, partnered with developer James Rouse on significant housing projects like the low-income Freedom Apartments, completed in 1951. CSD engaged in everything from residential design to massive urban planning projects, contributing to the now-famous renaissance of Baltimore’s downtown with the design of the city’s Convention Center in 1979.

By the mid ’80s, with 50 people on the payroll and the second generation ready to take the reins, the business began to change. “The firm started to specialize, and some of that had to do with the interests of the [new] leadership,” Spies says. It also had to do with the shifting nature of architectural practice. The firm eased away from Cochran’s mantra of broad generalization and moved, instead, to a firm with three legs: senior living, healthcare, and education. It also moved away from cutting-edge design. “Because we were doing larger commissions, dealing with boards of trustees instead of individual owners, we became bigger, more conservative, less edgy with the architecture.”

Still, CSD became known as an effective firm that took exceptional care of its clients. “CSD had a great group of people,” says Jamie Snead of local firm Ziger/Snead, who worked at CSD for several years in the 1980s. “They kept a client’s best interests at heart, and they were very well respected.” By the late 1990s, the three specialties were firmly entrenched, with senior living a major component of CSD’s workload. Projects had popped up all over the country, and staff seemed to spend more time on airplanes than in Baltimore.

So, in 2002, a Dallas office opened to service the booming market in the South and Southwest. A seasoned senior living designer named David Dillard headed the Dallas branch and four years later became president of the firm, replacing Mike Bollinger, who had served for years as the president, CEO, and CFO.

Whereas Bollinger had consolidated leadership power, Dillard—a designer at heart—spread responsibility to a new CFO and COO, which allowed him to focus more on design. As Dillard began his tenure, the firm started thinking about moving from the second to the third generation of ownership. It was riding high on nearly $19 million in billings. Then the calendar clicked to 2008.

In the fall of 2008, the Titanic that had been senior living hit the proverbial iceberg. Multimillion-dollar projects simply dissipated or were put on indefinite hold. The Dallas office saw a 1-million-square-foot project in Naples, Fla., and a 30-story high-rise in Atlanta “instantly come off the shelf,” Dillard remembers. “That will tend to send tremors around the place.”

Former CFO Mark Debinski, who continues to serve as liquidation manager for CSD, says several things contributed to the demise of the company beyond the revenue loss. Because the firm is still in the final stages of liquidation, Debinski would not go into specifics or say how much debt CSD had accrued, except that it was “much higher as a percentage than was ideal for a firm.” Dillard offers a telling example: “At the point of closure, we were five years into a 10-year lease of roughly 50,000 square feet. It was costing us north of $30 a square foot. That is a huge burden. And that was immoveable.”

In addition to the expensive lease and legacy obligations to former partners, there was a third factor: high insurance costs related to inadequate risk management in the firm’s past. “I cannot reiterate the importance of proactive risk management in order to maintain proper exposure,” Debinski says.

Spies believes that survival today also requires a firm to have more breadth in its portfolio—that it must look more like the CSD of the first generation. “The firms that are doing best in a down economy are diversified,” he says. “CSD basically had a three-legged stool, and one of those legs completely fell off. In hindsight, we should have had more legs on that stool to remain standing.”

Dillard, however, disagrees. “Tom and I agree on 98 percent of things, but I think business will go to the experts,” he says. “The days of the generalist are over. Diversification is easy to say, but it’s very difficult to do, and I don’t think a fourth leg would have helped us.”

By the end of 2008, Dillard says, it was evident something needed to be done, and the firm began the “agonizing choreography” of eliminating staff in both offices. Four rounds of layoffs over the next 10 months would eliminate 60 people. In the end, just 30 employees remained when the doors closed.

Katelin Crook, the firm’s marketing manager, was one of them. She says staffers started making references to the show Survivor and formed alliances. There were pro-Dillard people, those who believed he was bringing fresh energy and design savvy to the firm, and anti-Dillard people, who thought he had plans to start his own firm.

Still, Spies says it took a long time for the Baltimore office to realize what was happening. “We were eternal optimists, and we thought projects would come along,” he says. Dillard, in Dallas, had a different view. He and Debinski (who was hired as CFO in 2007) called for quick action as early as January 2009. “There was a diversity of opinion about when to do the wind-down. The CFO and I were collaborating in the cockpit, and we would have wound down CSD earlier. [The closure] was professional and friendly, but there was a clear two-party position for months. There was so much inertia of 62 years, the emotion of, ‘How can we possibly let this crash?’ ”

“I do think there was a difference with the people who still practiced in the [Baltimore] area,” Spies agrees. “Dallas had been in existence for seven years, so there can’t be the same feeling of attachment as being CSD for six decades.”

The top brass did agree that everything needed to be done to ensure that staff and clients had a safe landing. The board entertained a number of plans. Plan A was to carry on, which quickly became fiscally impossible. Plan B was to sell. CSD quietly began shopping itself to other firms, but by the summer of ’09, no strong offers emerged. Plan C was bankruptcy, which everyone agreed was not a palatable option.

Then there was Plan D. It had two parts. D1: Break up the firm and sell viable components to competitors. D2: Dissolve and start new firms. “We like to call it a benign dismemberment,” Debinski says of Plan D.

The Baltimore office went with Plan D1, effectively selling its education studio to HCM. It was a lightning-fast deal. Spies proposed the idea to Hord during their Sunday chat on Sept. 6. On Tuesday night, Hord gathered his executive committee, this time at his dining-room table, to hash out the details. HCM would make a strategic purchase of CSD staff and projects and would assume the contracts (and the risks) as written. This also required negotiating with the 40 or so consultants working on those projects; HCM struck 125 separate agreements with contractors in record time.

The week of Sept. 14, Hord and Spies went to clients to explain the situation and ask them to continue with HCM. “We were able to say to our clients, ‘On Oct. 2, you’re going to call me on the phone. On Oct. 5, you are still going to call me; it will just be on a different phone number. But it’s the same contract, the same people, the same coming due date,’ ” Spies says.

In the end, all clients made the switch, a signal of the loyalty and trust that CSD had built over its decades of practice. Twenty jobs were transferred from CSD to HCM, along with the staff in charge of those projects. Some projects had only weeks left until completion, and others had barely begun schematics. On Oct. 2, CSD closed. By 9 a.m. the next Monday morning, all of the computers and 13 staff were up and running at HCM.

“It was relatively seamless for clients. They simply saw different names on the letterhead,” Hord says. He and Spies are unaware of other firms who have dissolved in this manner. Peter Piven of Philadelphia-based Peter Piven Management Consultants agrees that this type of deal “is certainly unusual.” (Piven would not comment specifically on the details of this purchase, as he has consulted with both firms.)

Down south, David Dillard didn’t even need to move. He started a new firm specializing in senior living and named it D2, in honor of the chosen dissolution plan. He kept the same office space, renegotiating his existing lease, and set about structuring a lean business plan based on the lessons he learned at CSD. Dillard kept his eight CSD employees and a number of existing projects. Meanwhile, several leaders in Baltimore’s senior living studio went to local firm Brown Craig Turner.

The details of how and why CSD went under are still being debated by former employees. Crook and the rest of the staff had learned of the firm’s fate just three weeks before the final day. She found out secondhand from one of her staffers, who was told of the closure while being let go. “It was never obvious this was the eventual outcome,” says Crook, now marketing director at Ziger/Snead. “The whole industry was going through layoffs. I was always optimistic.” So optimistic that she signed a contract on a new house just days before hearing the news.